Ellora’s Cave Fails to Show Up, Respond to Discovery in Lawsuit

Christine Brashears, owner of Samhain Publishing, brought suit against Ellora’s Cave on April 2008. The details of the original suit I blogged about here. Ellora’s Cave filed a countersuit, alleging Brashear engaged in misappropriation of trade secrets, defamation, breach of contract, tortious interference with existing and prospective contracts, among other allegations.

Discovery (the exchange of paper documents, written questions, and oral depositions) commenced but Ellora’s Cave refused to comply with repeated requests from Brashear and orders of the court. Finally, the court found Ellora’s Cave in contempt and dismissed with prejudice (meaning that they couldn’t bring these claims again) all the allegations against Brashears. This occurred in November of 2009. (PDF ruling here).

Ellora’s Cave was given one last chance to respond to the discovery but instead of responding, they filed for a protective order asking the court to limit what documents EC had to produce to Brashear. The Court granted the motion in part and denied the motion in part. A pretrial hearing was scheduled.

No attorney showed up for the pretrial nor did any of the representatives for EC. I understand missing court appointments (I really don’t understand it but it can happen) but to not even follow up and provide even a lame excuse? This was the third attorney that EC had in the litigation, the previous two withdrawing.

As the court order noted, the court placed phone calls, waited sixty-five minutes, and still there was no response. The court then ordered a judgment against EC in favor of Brashear. (PDF order here).

All that is left for Brashear is to prove her damages or what she believes that Ellora’s Cave owes her. According to her petition, she has estimated the profit of Ellora’s Cave each year and reported that to the IRS. Likely, she will present this as evidence of her loss. If EC doesn’t show up (and why would anyone expect them to at this point), the court doesn’t have much option but to take the evidence provided by Brashear as verbotim. According to the Forbes article, EC was doing $6.7 million in revenue in 2006 and a recent article points to$5 million in revenue in 2009. (Let’s not even get started about how the most well known brand in romance epublishing had declining revenues when ebook sales are quadrupling every quarter).

At this point, Ellora’s Cave can ask for a reconsideration by the judge but these are rarely granted unless there are extenuating circumstances like the attorney’s relative dying but even then you can contact the judge and ask for an extension of time. EC can appeal the judgment but, in my opinion, it’s not likely to be overturned by an appellate court. If EC did appeal, it would have to put up an appeal bond which is generally 10% of the overall judgment and, of course, interest would accrue. Further, they would have to pay for a law firm to do an appeal and appeals are very expensive. If they don’t act, the judgment would be considered final and Brashear could place a lien on the EC profits.

What this means for Ellora’s Cave depends largely upon its cash reserves. If it has the money to pay the judgment, it may delay expansion but EC does not need a ready amount of cash to keep publishing given that much of the business is royalty based, from the authors to the editors. If it doesn’t have the ready cash? That’s probably not very good for EC.

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Jane Litte is the founder of Dear Author, a lawyer, and a lover of pencil skirts. She self publishes NA and contemporaries (and publishes with Berkley and Montlake) and spends her downtime reading romances and writing about them. Her TBR pile is much larger than the one shown in the picture and not as pretty.
You can reach Jane by email at jane @ dearauthor dot com

Fascinating. I shared this with my lawyer hubby this morning. We’re both interested in finding out what happens to the attorney who didn’t bother to show up or call. Just thinking of how some of our local judges would respond to that makes me wince.

As I read that ruling, I cringed. I’m curious about the withdrawals of the first two — client management problems or payment problems spring to mind, although I know there can be all sorts of valid reasons to change counsel as a case progresses.

I’m also wondering now about the corporate structure, asset titling, and cash flow of EC. Being a pessimist, I’m guessing that Brashears (or rather, her attorney) is going to have much more work to do in order to actually collect on her judgment.

Can you collect on nothing? I think EC has had monetary issues for a while and if I’m correct it would explain so much. The incident with them auctioning off authors, their lateness in paying authors, checks bouncing.

As an attorney, I think the withdrawals likely point to an obstructive client. I’ve withdrawn from cases (and it’s not always easy) when the client fails to communicate or be reasonable in the face of a lawsuit.

This doesn’t bode well. Wonder what’s going on over there at EC.

@anon, it’s difficult, though not impossible, to collect on folks who are judgment proof, but it would really depend on who (person, entity) specifically was sued and corporate structure, etc.

Um, looks to me like EC does not cooperate with their legal counsel and/or do not pay them, and they, of course, withdraw. As someone who worked in defense litigation for over 20 years, I get the feeling that is what has been happening with their legal counsel.

As to the loss in revenues…no comment. Anyone that has been reading erotic romance for as long as I have can probably answer that question… it is not rocket science.

@Sheena: It doesn’t matter if Brashear wasn’t blameless. EC had an opportunity to present their side of the case to the court and through delays and not showing up for hearings and complying with court orders, they have been punished with a default judgment. If they wanted to prove their case, they had to diligently prosecute it and/or defend it. They didn’t.

All is definitely not well at Ellora’s Cave and with its owner from other public documents. Whatever happened with the suit against Borders? Last thing I remember was the motion to dismiss Jane reported on last year.

Wow…have followed this whole thing with a wary eye. As a writer, I’m staying away from EC. What a pity, though. Seemed like they had a wonderful start. To end up like this is just unfortunate for everyone involved, no matter what’s going on.

Honestly, in the 7 years that I’ve been reading erotic romance EC has been doomed several times over in different forums, blogs and whatnot. Seems like one of those cyclical things: every two years, the rumors start again: EC is not paying their authors, EC is not doing this or that, they should be in trouble, etc. I’ll believe it when I see it.

How true. To see bankrupty papers or legal paperwork to end the partnership as a business that seems to be the way they are conducting it would definitely show that Ellora’s Cave is done for it.

As an example: My mom has threaten to divorce her 3rd husband many times and I have gotten to the point that I will believe it when I see divorce papers filed in the court. Same thing as your statement.

To see bankrupty papers or legal paperwork to end the partnership as a business that seems to be the way they are conducting it would definitely show that Ellora's Cave is done for it.

It’s not a partnership, it’s a corporation. And there are a bunch of red flags flying although it seems like the core business, Ellora’s Cave, should be salvageable– depending of course on the debt load it is carrying.

Tina Engler is involved with five entities that were incorporated in the state of Ohio between 2002 and 2005. Three of these had their articles of incorporation canceled and put on hold by the state in 2009 for failure to file annual reports and pay franchise fees and taxes.

These were: Gothik Grounds (a coffee shop chain, according to an article I found on Google), Lady Jaided, Inc. (Don’t know what this was) and AWBRIDGE, HANWELL & HARTLEY, INC. (a shop that was supposed to specialize in high end art and books). There appears to have been at least one coffee shop called Gothik Grounds in Cuyahoga, Ohio. A limited liability company, Jasmine Jade Enterprises, LLC, doesn’t show up anywhere except as having a tax lien against it for almost $12,000 for failure to pay state withholding taxes.

There’s a good way and a bad way to retrench. The bad way is to just stop paying things, cooperating with the court, showing up for hearings. That is a sure fire path to disaster. And from the documents that have been posted here and the information on Ohio’s Secretary of State website, it appears to be path they are taking.

I was reading the comments made about EC 2 years ago when the lawsuit was filed. There were many, many authors defending EC.
I have noticed that not one of those authors are jumping into the fray now.
Is that because they’ve stopped reading dearauthor.com or because their view of EC has changed?
I’m really curious….

Mireya, yes, the blind loyalty card doesn’t exist anymore, at least among the authors with the scars to prove it, many of whom are EC authors.
We don’t show up here as EC authors because it doesn’t seem to make any difference. Sales are good, the readers are buying, edits are harsh (good thing) and the company is moving along without trumpeting its every move.
The lawsuit? It doesn’t really matter to me, and as far as I know it’s not affecting day to day business.
Oh, another reason EC authors don’t turn up? Because they get sliced up a treat, and to be honest, it’s a lot of time out of a day with nothing to show for it. Most would rather be writing.
I’m an Ellora’s Cave author. They treat their authors well (not been there since the beginning, so don’t know about the history, but certainly it’s true these days), we get paid every month and sales are good. As long as that continues, I’ll be there.
And most of my fellow authors there are some of the most savvy, open and nicest people I’ve ever met.

@Mireya, I can see your point but I don’t know if it’s that simplistic of an answer.
@Lynne Connolly: I am genuinely interested. I wasn’t being snarky or talking out the side of my mouth. I am yet unpublished, and denigrating people who are more accomplished than myself is counterintuitive.
I appreciate you telling me your view. I like hearing more than one side to the story.

Oh, wow – this discussion has been very disheartening for this new EC author! Thank you for posting. I’m sorry for the troubles others have expressed above. So far, my experience has been smooth and professional, but all of this certainly rips the blinders off. I tend to go into things naively and la-la-optimistic, so your post and subsequent comments have reminded me to always pay attention and remain aware and alert. I will keep an eye out for news and updates.

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